What do levels really mean?
As far as I know, the XP system in the console versions of the game is largely just for show. It will unlock things like character skins and concept art once you hit certain levels, but it's all extra or aesthetic based unlocks. Mortal Kombat had a similar coin (or should I say koin?) system that allowed players to unlock things like the button combinations to enter to perform a fatality. With your levels you should unlock Armory Keys that can be used in the Archives to specifically select what things you want.